Wall Street Banks Penalized $549 Million for Failing to Preserve Messaging App Records
Today, the Securities and Exchange Commission (SEC) has issued a statement stating that 11 financial institutions have been collectively fined $549 million by federal regulatory agencies. This penalty was imposed due to the utilization of messaging apps such as WhatsApp, iMessage, Signal, and text messages for discussions regarding trades and other business matters. According to securities laws, investment firms and banks are obligated to retain communication records and ensure that employees conduct business solely through authorized channels. The SEC has found that these firms failed to maintain or preserve the majority of these off-channel communications, thereby violating federal securities laws.
Wall Street firms have been fined more than half a billion dollars for using messaging apps instead of email, approved messaging platforms or other easily archived channels. Firms penalized by the SEC include Wells Fargo ($125 million), BNP Paribas ($35 million), SG Americas Securities ($35 million), BMO Capital Markets ($25 million), Mizuho Securities ($25 million), Houlihan Lokey Capital ($15 million). , Moelis & Company ($10 million), Wedbush Securities ($10 million), and SMBC Nikko Securities America ($9 million). Meanwhile, the Commodity Futures Trading Commission (CFTC) fined Wells Fargo ($75 million), BNP Paribas ($75 million), Société Générale ($75 million), and Bank of Montreal ($35 million).
“Accounting errors like these undermine our ability to conduct effective regulation, often at the expense of investors,” said Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement. “The Commission’s message could not be clearer – recordkeeping and oversight requirements are fundamental, and registrants who fail to comply with these key regulatory obligations do so at their own peril,” said CFTC Director of Enforcement Ian McGinley.
Federal regulators said all the companies admitted the facts of the unauthorized communications when they accepted the penalties. “As described in the SEC’s orders, the companies admitted that at least since 2019, their employees frequently communicated about their employers’ business through various messaging platforms on their personal devices, including iMessage, WhatsApp and Signal,” the SEC wrote. opinion. “The companies failed to maintain or preserve most of these out-of-channel communications, in violation of federal securities laws. By failing to maintain and preserve the required records, certain companies likely lost these out-of-channel communications to the Commission in various SEC investigations.”
Both government agencies emphasized that the problem was pervasive and not limited to entry-level and junior employees. “The failures involved employees at multiple levels of authority, including supervisors and senior management,” the SEC said.
